Sizing the EU app economy

Apps running on mobile and social platforms have transformed the global gaming market and disrupted the order of the technology industry. The emerging platforms and business models like app stores and freemium pricing are rippling through — if not ripping apart — enterprise tech sectors. A few Nordic companies — including Rovio, King.com, and Supercell — are showing tremendous success from beyond Silicon Valley. But will the emerging app economy reboot a struggling Europe, jump-starting job growth and infusing European Union countries with startup energy? Signs are promising.

This report focuses on sizing and qualifying the EU app ecosystem, with an eye toward revenue generation, jobs supported, and the bottlenecks still facing EU app developers. Key findings from our analysis, which is based in part on two surveys of developers targeting EU markets, include the following:

EU developers took in $23.7 billion (€17.5 billion) in revenue in 2013, and we forecast that figure will increase to $85.3 billion (€63 billion) in five years. But you might be surprised where a lot of that revenue comes from. In addition to $8.1 billion (€6.0 billion) in app sales, in-app spending for virtual goods, and advertising, EU developers recognized $15.6 billion (€11.5 billion) in 2013 from contract labor. And much of the developer-for-hire business is for companies that aren’t really in the app business per se but use apps to support and market their mainstream offerings like financial services, retailing, and packaged goods.

Fewer than half of the independent developers we surveyed said they were offering services for hire, so that’s a potentially untapped market for startups. Similarly, half of the enterprises that did their own in-house development also used third-party developers. And in-house developers are by and large more satisfied in achieving their commercial objectives than independents, many of whom are frustrated by low prices, free products, or barely emerging ad revenues.

The EU app-developer workforce will grow from 1 million in 2013 to 2.8 million in 2018. Additional support and marketing staff result in total app economy jobs of 1.8 million in 2013, growing to 4.8 million in 2018.

EU developers face more business than technical bottlenecks. Increasing users’ willingness to pay for apps is problematic, but better discovery vehicles could help relieve high customer-acquisition costs. Similarly we see an opportunity for an EU marketplace where companies needing app development could identify, negotiate with, and hire contract developers.